USS response to Open Letter call for support on Shareholder Resolution

So USS have refused to support Shareholder Resolution 21 at Shell’s AGM on May 19th. Their response is below. This is of course incredibly disappointing and we will continue to press USS to provide us with a pension that doesn’t rely on carbon intensive investments. We are asking for a meeting with Simon Pilcher Chief of Investment Strategy at USS as we were promised in January. Thanks all for continuing support.

Here is USS’s response:

Thank you for your email of 10th May and for forwarding the petition by USS members calling for USS to support the shareholder resolution at Shell’s forthcoming AGM.

Upon careful consideration, we have decided to vote against this resolution which is calling for Shell to set and publish targets aligned with the goals of the Paris climate agreement. This is because we do not believe that there is a sufficiently large gap between what the company has already committed to compared to the Paris Agreement. Indeed, we believe that voting for the resolution would be counter-productive and potentially undermine the management team who has responded to engagement and made significant progress in its approach to climate change in recent years.

I detail below the reasons for our decision:

As you know, USS has been one of a number of investors (under the auspices of the Climate Action 100+) to engage with Royal Dutch Shell (RDS) over recent years to encourage the company’s alignment with the Paris goals.  We believe that such active engagement and stewardship is a key responsibility of being an asset owner.   The outcomes of the CA100+ engagements have included two joint statements between the company and investors, the latest of which was in April 2020.  The key points of the RDS commitments in its April 2020 statement are as follows:

  • RDS plans to become a net-zero emissions energy business by 2050 or sooner (covering scope one, two and three emissions)
  • An ambition to be net zero on all the emissions from the manufacture of all their products (scope one and two) by 2050 at the latest;
  • Accelerating Shell’s Net Carbon Footprint ambition to be in step with society’s aim to limit the average temperature rise to 1.5 degrees Celsius in line with the goals of the Paris Agreement on Climate Change. This means reducing the Net Carbon Footprint of the energy products that Shell sells to its customers by around 65% by 2050 (increased from around 50% as stated in 2018), and by around 30% by 2035 (increased from around 20%);
  • A pivot towards serving businesses and sectors that by 2050 are also net-zero emissions

USS supports the position that there needs to be a transition to a low carbon future, a process by which oil and gas companies can achieve the Paris goals.  This transition will require the use of fossil fuels for the foreseeable future as policy makers set the framework for a low carbon future, society shifts its preferences, and the use of low carbon alternatives grows to replace existing energy sources.  RDS has made a commitment to align with the Paris climate agreement (beyond most companies in the sector) including targets and realignment of remuneration to incentivise this shift.  They have also committed to working with the users of its products (responsible for 85% of emissions) to develop lower carbon alternatives. We do not believe there to be a large gap between the company and the requests made by the resolution.

In summary, USS supports the approach which RDS is adopting and, as a result, the scheme will not be supporting Resolution 21 as we believe that it would send the wrong message to management and would be counter-productive to our active engagement approach which has made significant progress with the company towards it meeting the Paris-aligned climate targets.

I know this will come as a disappointment to you and your supporters but please be assured that, as long as we continue to hold Shell in our portfolio, USS will monitor carefully the actions of Shell to ensure that they adhere to their commitments and will continue to engage robustly with the board and senior executives on a regular basis.

Kind regards

Dr Daniel Summerfield

Head of Corporate Affairs

USS, Climate and Shell AGM May 19th 2020 Resolution 21

 Ethics for USS are working with others to support Resolution 21 at the Shell AGM in May. The letter below – signed by 405 USS members – many of them senior academics – from 35 UK institutions has been sent to USS on May 10th. We will publish their response when received.

We call upon USS to vote for Shareholder Resolution 21 at the Shell AGM on May 19th 2020. Resolution 21, relating to climate change, can be read in full on page 6 of Shell’s AGM notice

Currently USS has approximately £500 million invested in Shell and therefore the views of USS members and USS institutions deserve careful consideration with regard to the USS vote. In 2017, 2018 and 2019 USS voted against similar climate change proposals. 

Resolution 21 calls on Shell to set and publish targets aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2 °C above pre-industrial levels; that these targets need to cover the emissions of the company’s operations and the use of its energy products (Scope 1, 2 and 3); that targets be short, medium and long term and reviewed regularly in accordance with the best available science. The Resolution requests that targets are based on quantitative metrics such as greenhouse gas intensity or similar metrics and that annual reporting includes information about plans and progress to achieve these targets.

Shell Directors want shareholders to vote against Resolution 21 describing it, on page 7 of Shell’s AGM notice, as ‘unnecessary and potentially counter- productive to Shell’s efforts to support society in meeting the goals of the Paris Agreement.’ The Directors claim that their current and planned actions are a sufficient response to the threat of climate change. We note that Shell is continuing to drill for gas and oil around the world and continuing to look for new reserves of fossil fuels. In addition Shell is failing to meet its own green targets. 

The IPCC is clear. ‘The annual increase in global energy use is greater than the increase in renewable energy, meaning that fossil fuel use continues to grow. This growth needs to halt immediately’. Shell’s current approach is accelerating global climate change.

Failure to meet the Paris Climate Agreements will result in social and economic disruption that will have a severe negative impact on pension funds. It is therefore the fiduciary duty of USS and its trustees to support this important motion at the AGM. In addition over half of UK universities have divested from Fossil Fuels, with increasing numbers declaring climate emergencies. It is clearly in members’ interests for USS to vote in support of Resolution 21. We ask USS to inform Paul Kinnersley, retired USS member and co-ordinator of Ethics for USS, of USS’s voting intentions and rationale by May 15th. Paul wrote on this matter to USS Head of Corporate Affairs on February 27th but has yet to receive a response.

How should USS divest

Some thoughts from members of the Ethics for USS team (Andrew Jarvis, Keith Pitcher, Ceri Sullivan, Paul Kinnersley and Jay Ginn)

We need an energy transition, not a cliff

Here we are, pension owners with Shell as the primary asset securing our retirements, along with plenty of other high carbon investments in the USS portfolio. For a while now we have witnessed either ambivalence or embarrassment when members are presented with this information. We also understand the recent calls by some to immediately ‘divest’ from these holdings, but our response needs to acknowledge we have to build the low carbon future we want and need and how we behave as responsible investors plays a critical role in this. Like it or not, this low carbon future is built using our current fossil fuel endowment, and the Paris Agreement recognises this fact. This is why it is called an energy transition rather than a cliff. If so, our strategy should not be wholesale and immediate divestment from our fossil fuel holdings, but rather progressive divestment allied to wise re-investment of the proceeds from using fossil fuels.

Although it is the biggest private pension scheme in the UK, USS is small on the world stage. However, it can show genuine leadership by executing its fiduciary duty in ways that reflect the needs of the energy transition. Adopting a proactive strategy would certainly mark a significant and meaningful departure from the somewhat reactive strategy USS currently deploys in this space centred on using the global portfolio of Nationally Determined Contributions as a compass to follow. That strategy could easily result in a significant proportion of members’ investments becoming stranded by a rapidly changing political landscape.

We need to start with immediately preventing all future investment by USS in the development of any new coal, oil and gas reserves, because the there is no more head room in the Paris Agreement for expanding the drilled reserve. Starved of investment, Shell’s oil and gas reserves should deplete within about 10 to 15 years i.e. well within the 2050 time horizon called for by Paris. Currently Shell invests approximately three quarters of its one billion dollar R&D budget on developing its oil and gas business, in addition to buying up new reserve prospected by third parties. This suggests USS’s strategy of shareholder engagement to change Shell’s practices has had very limited effect. Actively withholding investment is likely to speak far more meaningfully, and if Shell continue drilling then USS should wholesale divest. 

If drilling stops, USS could wind down its position in its fossil fuel holdings in line with the required exhaustion of the the reserve over the next decade i.e. by 2030 USS should hold no such assets. Again, if Shell fail to honour this climb down then USS should wholesale divest. Of course USS will need to find alternative holdings to replace the likes of Shell and the responsible thing to do would be to invest in growing low carbon energy providers so that they can fill this space. This is not only responsible with respect to climate risks, history has shown us that energy investments appear to have the kind of return characteristics investment-based pensions demand. Over the last decade we have seen significant improvements in technical and economic performance in renewable energy technologies. These, coupled with emerging policies for renewables to replace fossil fuel usage in energy generation, heating and transportation, provide real opportunities for USS to realign its investments at scale.

Of course, if Shell is willing to now exclusively invest in developing carbon free energy sources, in the process turning itself into an exclusively renewables provider by 2030, then it could remain a primary asset in the USS portfolio. It’s relatively poor track record to date argues against this, but the scale of the required transition means we shouldn’t disregard the likes of Shell from playing their part in the transition. Similarly, the members should be encouraged to source their energy in line with this strategy to help provide the required demand.

This strategy causes us to reflect on how other USS holdings are associated with consuming the remaining fossil fuel endowment without contributing meaningfully to the transition. Of these Heathrow is the biggest and most notable example. It also suggests USS needs to use better the influence it does have in the sector to help create the necessary momentum, something we should be demanding as members. Pensions are now up there with governments as primary sources of the investments that shape the future. One would hope that University pensions would lead on shaping this future for the better.

Meeting with USS Responsible Investment Team

We had an interesting and informative meeting on Jan 16th and the plan is that we should meet again during the early summer. These are the agreed actions:

USS will:

1 Review the presentation of risks of ethical investments in newsletters and on the website

2 Send examples of the survey questions used when seeking members’ views to Ethics for USS along with draft future questions for comment

3. USS to consider how views on responsible investing from deferred and retired members could be heard.

4. Organise a meeting between Ethics for USS, Simon Pilcher, Chief Executive of Investment Management and Naomi Clark, Head of Investment Product Management on how plans for investment strategy are developing in relation to the Climate Emergency

5. Consider appearing at a discussion about responsible investing with a wider group of USS members.

Ethics for USS will:

1 Discuss with ShareAction the proposed meeting in 5 above

2 Comment on survey questions sent to them and respond to other requests from USS on the presentation of information on the website

About this campaign

USS – the pension scheme for university staff in the UK – is one of the largest pension schemes in Europe. Currently (Jan 2020) they hold over £ 1 000 million in fossil fuels companies, £ 400 million in tobacco and £ 200 million in arms manufacturers. Ethics for USS is a group of USS members committed to reform USS and ensure an investment strategy that protects the planet, respects human rights, invests responsibly and ensures good pensions. Ethics for USS works closely with student groups including People and Planet and also with Share Action. Blog posts reflect the views of Ethics for USS members and not any organisation employing them. Contact Ethics for USS at

UK Academic Institutions that have already divested

The team at People and Planet have led a fantastic campaign to persuade UK Universities to divest their own funds from fossil fuels. This list is taken from

If these institutions can divest surely USS can do the same ??

Academic Institutions that have divested or are in the process of divesting from fossil fuels: Glasgow, SOAS, Queen Margaret, Warwick, University of the Arts, Surrey, Oxford Brookes, Sheffield, Queen Mary London, Nottingham Trent, Kent, Wales Trinity St Davids, Abertay Dundee, Worcester, Bournemouth, Manchester Met, St Andrews, Kings College London, Edinburgh, Durham, Bristol, Cardiff, Nottingham, Bath, Gloucestershire, Loughborough, Keele, Stirling, Swansea, Goldsmiths Liverpool, Ulster, York, University College London

Academic Institutions that have declared they won’t invest in fossil fuels: University of Bedfordshire, Canterbury Christchurch, Newman, Chester, University of the Creative Arts, Cumbria, Winchester, Wrexham Glyndwr, Writtle University College, York St John, East Anglia, Buckinghamshire New, Northumbria, Leeds Trinity, Sheffield Hallam, Huddersfield, Sussex

Academic Institutions that have divested from coal and tar sands: Wolfson College Oxford, Birmingham City, Cranfield, Heriot Watt, Portsmouth, Westminster, DeMontfort, LSE, Southampton, Newcastle, Gloucestershire, Aston, Greenwich, Exeter